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Apple is only selling AT&T iPhones with Next plans, but it doesn't really matter

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Everything is confusing, but in the end, you pay the same

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Recently, the options available to purchase an AT&T iPhone at Apple changed. Like with other third-party AT&T dealers, such as Walmart and Best Buy, it's only possible to purchase an AT&T iPhone from Apple with the Next payment plan, instead of with a two-year contract as before (and is still available for Sprint and Verizon). There's a ton of confusion around AT&T's Next plans, and the carrier hasn't done itself any favors with the naming of them. They've somehow made the process of buying a smartphone more complicated than ever. But if you run the math, it turns out that buying a phone with Next isn't much different than with the old two-year contract.

Just by way of example of how confusing this all is, let's walk through buying the most popular iPhone, a 16GB iPhone 6. On AT&T's old structure, if you were buying an iPhone 6 with a two-year contract, you'd pay $199 up front and then have a monthly cost of $80.00 ($40 for 3GB of data and unlimited talk and text, $40 for the smartphone "access"). You'd also be on the hook for a $40 "activation fee" on your first month's bill, and you'd be locked into AT&T for 24 months. Total cost over two years: $2,159.00 plus taxes.

The Next 18 plan will cost a little over $2 more per month compared to the contract plan

Now let's buy the same phone with Next. A basic, single-line Next plan with 3GB of data costs $65 per month. Next customers don't have to pay an activation fee, and if your credit is good enough, you don't have to put a down payment on the phone. Sign up for Next 18 (which is actually a 24-month payment plan — more on this later), and you pay $27.09 per month for your phone on top of your monthly rate plan. That makes your monthly cost for the 3GB plan $92.09. Over the course of two years, that's $2,210.16, or $51.16 more than the old two-year contract plan.

The Next 18 plan is more expensive than the old two-year contract by a little over $2 per month. That's not a hugely material difference for most people that are already paying upwards of $2,000 for a phone and service. There are some advantages to Next that don't come with a two-year contract: you can pay off the balance of the phone early and either upgrade to a new device or have lower monthly payments. And you could cancel your service without a penalty aside from covering the cost of the phone. But the reality is that most people aren't going to pay off their phone early (after all, why would they, a Next plan is essentially a zero-interest loan) nor are they looking to upgrade more often than every couple of years. AT&T provides a steeper discount on the monthly service if you opt for more data, but a recent research report from Mobidia says the average American uses 1.8GB of data per month on their smartphone, which means most people are just fine with the 3GB plan.

AT&T's naming structure makes things especially confusing

But where things really get confusing is in AT&T's naming structure. There are three different Next payment plans that don't require a down payment: Next 12, Next 18, and Next 24. You'd not be alone in thinking that the Next 12 plan consists of 12 monthly payments and the Next 18 and 24 plans are 18 and 24 months, respectively. But you'd be wrong: the Next 12 plan actually has 20 months of payments, while the Next 18 plan is 24 months and the Next 24 plan is 30 months. The 12, 18, and 24 part of the Next plan names refer to when you can trade in your phone for a new one at no cost, letting you upgrade your phone without having to pay it off in full. But we don't recommend doing that: you're better off paying the remainder on your balance and selling the phone yourself before buying a new phone than just handing over to AT&T. A service like Gazelle or NextWorth will pay you upwards of $300 for a 16GB iPhone 6 in decent condition right now, which is more than the remainder left after 18 months of payments on Next.

Buying a phone on a Next payment plan seems like it would be much worse than the old two-year contract where you just plunked down two Benjamins and signed your life away. But it's not worse, necessarily, and for some consumers it might turn out to be a decent deal. That's great, except for the fact that actually figuring out what you should pick can literally require using a spreadsheet with math formulas (that's literally what we did using a modified and updated version of Mathew Schaffer's spreadsheet). And that's largely the fault of AT&T, which has obfuscated the numbers behind misleading names and an overwhelming amount of options. But at the end of the day, the difference is miniscule and AT&T gets paid the same amount of money either way. If you really want the old contract plan, AT&T will give to you if you buy the iPhone from them.

The idea of installment plans is a good one, but the execution is not

In theory, the idea of installment plans is a legitimately good one, so long as they're well-structured to be cheaper. It means that people don't need out lay out the full cost of the phone when the purchase it, which can help democratize high-end phones. It means that you're not technically locked into a two-year contract. It means that if your phone is paid off, you get cheaper service costs. All these things ought to be great steps forward.

I'm not sure if AT&T, or any carrier, can overcome the inherently confusing nature of these plans. Everybody sort of instinctually understands "$199 with a two-year contract," but trying to get your feeble human brain to understand what "$27.09 per month" actually means in terms of the long term costs is much harder. It's much harder to tell if you're getting a deal or if you're being taken for a ride. And there's nothing great about that.